Nov 14, 2011

Juju’s Dilemma

Love him or hate him, the one thing you have to give Julius Malema credit for is his ability to get people in South Africa and around the rest of the world talking about issues of inequality, poverty, high unemployment, and the lack of economic freedom  for the majority of South Africans even after 17 years of post-apartheid rule. These are social time bombs that cannot continue to be ignored especially as we see a new ruling class flaunt obscene levels of new wealth while the majority remain stuck in poverty. Malema’s proposed solutions are what have people, including the ruling ANC, nervous about; these include nationalisation of mines and land expropriation without compensation. 

Nationalisation of mines would mean the change of ownership. However, how would that solve the issue of massive unemployment? Malema argues that the change of ownership of a mine can result in more people being employed, and greater revenues; and those greater revenues can be used to fund social programmes. I’m not entirely sure why he believes that under their current ownership mines aren’t as productive as they would be in public hands, and that there are hundreds or thousands of jobs that are just waiting to be created. And further, how would they be more profitable when nationalised?

This certainly wasn’t the case with Zambia’s copper mines. When prices and production fell, these mines became a drain on the national coffers. This was coupled with government meddling, lack of maintenance and investment in plant, equipment and technology. All these forces were a recipe for disaster and the industry was brought down to its knees, taking with it thousands of jobs and causing a tsunami across the country’s economy.

In addressing this issue of nationalisation, I have to ask – who exactly would benefit? Well, first there are the investors and shareholders in the mining companies who will need to be paid market value for the investment. Would this be achieved by purchasing shares on the open market or through negotiation? And does the government have the money to do so? This is something the South African government cannot get around, unless they wish to forcibly nationalise the mines and set the stage for a showdown large institutional investors and their countries of origin, as well as shareholders within their own country.

Other beneficiaries are people like Malema with business interests in the mining industry who are jockeying for positions as some sort of “Head of the Mining Nationalisation Commission.” I see it purely as advocacy for personal empire building and individual power and not about national interests. Their reasoning rings false.

Government, in my opinion, shouldn’t be running businesses. Countries like South Africa already have a system sullied by corruption, nepotism, etc, and are these really the right people to be running such an important part of the economy? Governments should focus on good governance, and creating and maintaining an environment conducive to sound business practices.

This is an issue of grave national importance and should be spoken about openly and honestly. Do not allow loose talk to drown out all the voices in the room. History is littered with utopian ideas that were based on good intentions but with what is at stake here, I’m sure the people of South Africa can’t afford to say “ooops” in 5-10 years when things go to hell.


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